CAs Battle Strategy

Exclusive Interview: Computer Associates CEO Sanjay Kumar's targets include customer satisfaction and product flexibility.

Since becoming CEO of Computer Associates International Inc. in August 2000, Sanjay Kumar has overseen the realignment of corporate business units and the institution of new methods of financial reporting, and, last year, Kumar weathered a contentious proxy battle with dissident shareholder Sam Wyly. Executive Editor Stan Gibson discussed the Islandia, N.Y., companys corporate strategy with Kumar last week at Comdex in Chicago, where Kumar delivered a keynote speech.

eWEEK: Can you shed any light on the progress of the financial probe?
Kumar: We have committed to saying little publicly. These two agencies [the Securities and Exchange Commission and U.S. Attorneys Office] have a preliminary inquiry going on. We are very mindful of their needs, and well cooperate and provide any information they want. Weve asked that they do it as expediently as possible.

eWEEK: You canceled a bond offering scheduled for Feb. 5. Are you going to reschedule it?
Kumar: No. In this environment, wed have to pay just a huge premium in interest rates. The objective was to trade one kind of interest rate for another kind and to lock in a relatively low rate for the long term.

eWEEK: Last year, after the proxy fight, you and CA Chairman Charles Wang were saying the big lesson you learned was the need to communicate better. Since then, how have you communicated better?
Kumar: Lets take shareholders. Last quarter, we had an investor road show, where the management team went to four cities around the country and gave a major presentation updating our business. Well do that again at the end of [last] week. We also sent a team to Europe.
The second thing is communicating more with analysts and customers, through the media. You could ask Gartner [Inc.], Meta [Group Inc.] or [International Data Corp.]. Weve done many more interviews over the last six months than we did in the preceding six months, independent of the proxy. And the number of new people out there talking and giving interviews is much higher.

eWEEK: It seems that CA has moved a little bit away from acquisitions as a business plan.
Kumar: A little bit? We have moved wholesale. Lets be fair. Feb. 14, 2000, was the last time that we announced a deal. Thats two years, two weeks and a few days; thats a long time. And we havent done a deal for more than $25 million in two years; thats very unusual for CA. All our growth since that time has been internal growth. Im not saying well never do an acquisition in the future. You always have to evaluate your opportunities as they come. But our focus as a company is clearly on internal growth.

eWEEK: One area where youre challenged is in storage, by Veritas [Software Corp.]. There are a lot of little storage players out there. Is that a fertile field for acquisitions?
Kumar: Were always looking, but it has to complement our strategy, which is multiplatform storage. Today, people look at [Windows] NT, Unix and mainframe storage, and they just want storage to be storage. You need hardware and software to work together for that to happen. You have SAN [storage area network] switches, next-generation SAN devices, but you also need software. Its way beyond virtualization and pooling.

eWEEK: You are also competing with some people with whom you might be seen as partnering, like EMC [Corp.]. How is that playing out?
Kumar: There are some things that EMC does that are tied to their hardware. TimeFinder is one example. We work with TimeFinder; thats not a problem. We believe we have backup and recovery solutions that are very powerful. We think they are better than EMCs. In some areas well cooperate, and in some well compete. Is a hardware company going to be a successful platform independent software company? There hasnt been an example of one yet. Can they be the first one? Anything is possible.

eWEEK: IBM is trying to be that with Global Services.
Kumar: Trying--but on the solutions side. You cant argue with [IBM] Global Services success. It clearly has been successful. But on the pure, platform-neutral software side, have they been successful? I dont think so.

eWEEK: IBM is committed, and even Sun [Microsystems Inc.] now is committed to Linux.
Kumar: So are we. The facts on Linux are that we have 54 products that we have moved, ported or built new for Linux. Thats a lot. We have more there today than anyone else we know of. We are selling them. The sales force is trained. I spoke at LinuxWorld. Were very, very committed. Is there a guarantee its going to be an outrageous success? No. We have major enterprise customers that I believe have taken it seriously, like Citigroup [Inc.] and Salomon Smith Barney [Inc.]. Thats happening. IBM has invested heavily in it, as you know. Will that continue? We think so.

eWEEK: You have committed to J2EE [Java 2 Enterprise Edition] as a platform but also to Microsoft [Corp.s] .Net. How long can you continue to be a sort of Switzerland of platforms? Can you continue indefinitely?
Kumar: I think so. Weve done it for a long time. CA since 1978 has done multiplatform software. Its not easy. You have to work with multiple partners. We have teams that are focused on the partners software. We have a Microsoft .Net team. We have a J2EE team. We have a Windows NT/XP team, a Solaris team, an HP-UX team and an MVS team. Culturally, its very workable because we have done it for so long. Ultimately, we want to be customer responsive.

eWEEK: What role will you take with regard to industry standards?
Kumar: We take two roles. We have to make our software work across multiple platforms and permit our customers to have the choice of platform. We bear the burden of having to transcend the platforms. J2EE and .Net is a very good example. We will manage both infrastructures. We will bear the burden of having our common services layer work across both.
The second area we participate in is to work with standards bodies and platform providers to get as many things as common as possible. Having done that for many years, it has its ups and downs. There will always be proprietary standards in our industry. There will never be a time when there are only standards and nothing proprietary.

eWEEK: You have six business units. Which one is growing the fastest?
Kumar: The portal business is growing the fastest, but its also the smallest. Enterprise management and security are both really big.

eWEEK: Where are you spending most of your research and development dollars?
Kumar: Probably on the management space, cross-platform storage management, security for wireless infrastructure, and further modularizing the core Unicenter and adapting it to a common services layer.

eWEEK: What is the percentage of CAs business that is mobile-oriented?
Kumar: Directly mobile is about 5 percent. But mobile backup is about 10 percent, and security is about 10 percent.

eWEEK: One of the issues of the proxy fight was customer satisfaction. Are you where you want to be with customer satisfaction now, and if not, how much further will you have to go?
Kumar: You never get where you want to be with customer satisfaction. However, we have revamped our customer service organization. You have to give us credit. More customers are talking about us much more favorably than ever before. Weve changed. We actually have a team that went to work in Wal-Mart [Stores Inc.] stores to see how the business works. They put the sales guy on the mopping crew.

eWEEK: CA World is coming up. Will there be any surprises?
Kumar: There always will be. There will be focus on mobility and wireless. There will be a lot of new technologies this year. We will focus on some channel partner stuff this year--thats becoming a bigger and bigger business for us. And there will be some new customer initiatives.

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